New Jersey can stop planned cuts in charity care to one-third of the state's hospitals by tapping another $20 million in matching federal funding, four groups representing a wide range of hospitals said today.

The plan, however, is already drawing opposition from operators of health clinics.

Although Gov. Jon Corzine's proposed budget dedicates $605 million in charity care next year -- the same overall amount hospitals got for treating uninsured patients this year -- it would change the way the money would be spread out.

This year, 22 of the state's 73 hospitals, including Englewood Hospital and Medical Center and Morristown Memorial Hospital, only got 10 cents for every they dollar they spent treating uninsured patients. Depending on how much they spent on charity care in 2008, the rate of payment for these hospitals would be cut by another 50 percent. Other hospitals would get more.

However, a consultant hired by the hospitals, Health Management Associates of Chicago, has countered with a new idea: take half of the $40 million pool of money hospitals pay every year to support health clinics, and use it to apply for more federal funding from Medicaid.

The hospitals say such a manuever could generate a $20 million dollar-for-dollar match from the federal government, which would allow the state to reimburse the clinics and generate more money for hospital charity care. The plan would require permission from the U.S. Centers for Medicare and Medicaid Services.

"In this dire economy, we need to overturn every stone to ensure New Jersey is maximizing its federal reimbursement," said Suzanne Ianni, president and CEO of the Hospital Alliance, representing city hospitals. "New Jersey just can't afford to leave 'free' healthcare dollars on the table in Washington."

The new money could be used to replace more than $9 million Corzine trimmed to support medical students and bolster struggling hospitals, according to the statement released by the Alliance; the New Jersey Hospital Association; the Council of Teaching Hospitals; and the Catholic Healthcare Partnership of New Jersey.

But the idea alarms 19 clinic operators, which see about 350,000 patients every year. A spokeswoman for the federally-qualified health clinics said she doubts her members can afford to lose part of their state aid, even temporarily.

"My members are extraordinarily nervous at time when we are asked to see more people and do more," said Kathy Grant Davis, executive director of the New Jersey Primary Care Association.

She also worried that in this plan, the clinics would not be reimbursed for treating people who enter this country illegally, because they are not eligible for Medicaid.

The proposal comes at a dire time for New Jersey hospitals. Nine have closed in two years, and another 15 are in "financial distress" and are being monitored closely by the state health department, Health and Senior Services Commissioner Heather Howard told the Senate Budget Committee today.

As hospitals fail, more patients turn to the clinics, according to the primary care association's web site. Grant-Davis said another 100,000 patients are expected to seek health care at the clinics because of job losses and the exodus of obstetricians who can't pay expensive malpractice insurance premiums.

Howard said she and Human Services Commissioner Jennifer Velez would hold a meeting with hospital and clinics representatives to explore the idea.

"I commend hospitals to think creatively, but this is a proposal that needs to be vetted," Howard said.